• 3Q16 results in line
• Strong execution despite headwinds
• Firm balance sheet

3Q16 PATMI up 60.1% YoY

City Developments Ltd (CDL) announced that its 3Q16 PATMI increased 60.1% YoY to S$170.3m mainly due to stronger contributions from its property development segment and gains from the divestment of CDL’s interest in City eSolutions Ltd. In terms of the topline, revenues for the quarter rose 14.0% to S$922.8m similarly because of an improved performance from the property development segment, including a maiden contribution from the Gramercy Park project in Singapore and Hanover House in Reading, UK. Excluding one-time items, we judge this to be a fairly balanced set of results in line with our expectations.

Credible SG sales despite challenging conditions

Year to date, the group has sold 482 home units in Singapore with total sales value of S$622.4m (versus 477 units worth S$502.2m in the same period last year) – a credible performance given challenging conditions in the residential market. Management reports strong demand for the newly launched Forest Woods project, with over 70% of the 519-unit now already sold, while 38 units out of the 40 units launched at the 174-unit Gramercy Park has also been sold.

In China, we saw strong sales at Hong Leong City Center in Suzhou, where maiden profits from Phase 1 are anticipated from 4Q16 onwards and we understand that the Phase 2 launch has received a positive response from buyers. The group also successfully executed its third set of Profit Participation Securities (PPS) for the Nouvel 18 development in Oct 2016 for a valuation of S$2,750 psf and has by now cumulated over S$3.5b in funds under management in the PPS platform.

CDL continues to enjoy a strong balance sheet with a net gearing ratio of 27% and S$3b of cash, which provides the group with a sizeable war-chest for potential acquisitions ahead. Maintain BUY with an unchanged fair value estimate of S$9.89.

Source: OCBC Research - 11 Nov 2016